Wednesday was simply remarkable. For only the third time in history, the Dow Jones Industrial Average climbed off the canvas more than 500 points lower, to not only finish higher but to finish with a flourish. The 740-point reversal underscores my main assessment of the wild gyrations that have plagued the market for a little over two months.
I think the folks that pull the strings and trip the programs have been trying to shake out the weak brothers and sisters while also pushing around the White House.
The media is trying to cover its tracks by suggesting the administration backed away from actual tariffs, but that’s not the case. The administration is saying that there is time to negotiate, but that has been clear all along, as well as using the World Trade Organization (WTO). The fact is there was no “news” yesterday – it just increased the speculation that’s been poorly reported for a variety of reasons.
There is no doubt ratcheting up the trade war would have tough consequences for Americans initially, but the longer the country waits, the more economic pain we face; it won’t be transitory, nor will there be any way to fight back. However, the market is a reminder of why you must remain steady and opportunistic.
The Stock of the Day
Posted strong financial results and upbeat guidance going into the spring selling season.
New orders +30 volume +38% dollar value
Operating margin 9.8% +100-basis points
"We continue to remain positive on the outlook of the housing industry in general. Although interest rates have ticked up, unemployment remains low, the labor participation rate has been increasing, and wages have been moving modestly higher, though we think, even higher than the data the government captures. Feedback from our new home consultants indicates that our customer base feels confident in both job security and compensation levels in spite of the political noise that abounds."
-- Stuart Miller, Chief Executive Officer of Lennar
ADP Jobs Report Blows Away Consensus as February tallied revised higher.
241,000 Jobs March 2018
U.S. Employment Rocks: ADP employment report comes in well above consensus with strong results in key occupations. It’s the fifth consecutive month of 200,000+ employment gains.
Quality of Jobs
Not only is this a remarkable number, but the composition of job creation also has shifted to higher- paying employment in the service and goods-producing sectors.
- 176,000 Service Sector
- 44,000 Professional
- 40,000 Trade
- 18,000 Financial
- 28,000 Leisure
- -5,000 Mining
- -31,000 Construction
- -29,000 Manufacturing
This is real news that has real consequences in real lives.
- +31,000 Construction
- +29,000 Manufacturing
- +5,000 Mining
The good news is midsized (50 to 499) businesses are leading the way with the highest monthly total since October 2014.
The major indices are continuing the rally from yesterday and are all firmly in the green as the trade war fears take a back seat.
While many analysts and critics continue to howl at the prospect America would have the temerity to push back against against unfair China trade practices, Jamie Dimon has a different take on the issue. Here are a few snippets below. Folks we must fight back -- it's the right and smart thing to do.
Proper resolution of serious trade issues is good for the United States and for the rest of the world.
We should acknowledge many of the legitimate complaints around trade. Tariffs and non-tariff barriers to trade are often not fair; intellectual property is frequently stolen; and the rights to invest in and own companies in some countries, in many cases, are not equal. Countries commonly subsidize state-owned enterprises. When the U.S. administration talks about “free “and “fair,” it essentially means the same on all counts. This is not what has existed. It is not unreasonable for the United States to press ahead for more equivalency.
China is far more complex – and the complaints are more legitimate. China has realized significant economic and employment gains since joining the WTO in 2001. China was expected to continue on an aggressive path of opening up its economy, but this has happened at a much slower pace than most nations expected. Now, more than 16 years later, it has the second-largest economy in the world and is home to 20% of the Fortune 500 companies, yet it still considers itself a “developing” nation that should not be subject to the same WTO standards as the United States and other “developed” countries.
Recently, the United States threatened unilateral action against China. Of course, anything that starts to resemble a trade war creates risk and uncertainty to the global economic system. One of the administration’s best arguments is that negotiation alone has not worked.